Another Indian crypto exchange has shut down permanently due to the banking restriction and regulatory delays. The exchange cites denials in payment services and a sharp decline in trading volume resulting from the recent news of a draft bill to ban cryptocurrencies.
Also read: Indian Cryptocurrency Regulation Is Ready, Official Confirms
Koinex Shuts Down
Indian cryptocurrency exchange Koinex announced its shutdown Thursday. CEO Rahul Raj explained that “After months of uncertainty and disruption, we have regretfully decided to shut down all digital assets exchange services and operations today,” adding:
The digital assets trading services will be permanently disabled on all our platforms at 2:00 PM IST on Thursday, June 27, 2019. All open orders after this deadline will be automatically cancelled and the funds will be returned to corresponding wallets.
The exchange’s wallet service will continue to be functional but users are required to withdraw all funds from the platform by July 15. “Failing to do so may result in forfeiture of their funds, in case we are unable to keep the wallet function alive post the aforementioned timeline,” the exchange warned.
Koinex explained that a snapshot of users’ wallet balances will be taken for record and its “effort to disburse INR balances will begin immediately.” The company explained that in the next five weeks, it will attempt to release all user deposits to their registered bank accounts. A convenience fee of between INR 10 ($0.14) and INR 2,000 ($29) will be levied based on the user’s INR wallet balance. The exchange clarified:
Since the bank accounts with user funds are still frozen and the capital is held up, we have made arrangements for funds from our own resources … This is a voluntary move and is being undertaken even though it is not our legal obligation.
Koinex began service on Aug. 25, 2017. Within four months of launch, it recorded $265 million in trading volume and, at peak in December, it onboarded over 40,000 new users in 24 hours, the CEO claims. On its website, Koinex claims to have more than 1 million registered users and executed over 20,000 orders worth over $3 billion.
RBI Ban and Supreme Court Hearing
Raj also revealed that Koinex has been impacted by the crypto banking ban imposed by the central bank, the Reserve Bank of India (RBI).
In April last year, the central bank issued a circular banning regulated financial institutions from providing services to crypto businesses, giving them three months to exit relationships with companies and individuals dealing in cryptocurrencies. They also “block all such crypto-related transactions,” the CEO emphasized. While the RBI circular has been challenged in the country’s supreme court, nothing has changed so far and the banking restriction continues. Raj elaborated:
The last 14 months have been tough to operate a digital assets trading business in India, on account of the closure of bank accounts holding user deposits … Multiple delays by the government agencies in clarifying the regulatory framework for cryptocurrencies despite our pending writ petition in the Supreme Court of India.
“We have consistently been facing denials in payment services from payment gateways, bank account closures and blocking of transactions for trading of digital assets,” the CEO continued to share. “Even for non-crypto transactions like payment of salary, rent and purchase of equipment, our team members, service providers and vendors have had to answer questions from their respective banks — just because of an association with a digital assets exchange operator.”
Koinex has become the fourth crypto exchange to fall victim to the banking restriction by the RBI. In September last year, Zebpay shut down all its exchange activities in India due to the banking problem. Coindelta announced its shutdown in March, and Coinome made a similar announcement in May.
Several writ petitions have been filed to lift the banking ban. The country’s supreme court is set to hear the case on July 23. The court may also hear about the regulatory framework for cryptocurrency from the government at that time.
Indian Crypto Regulation
India’s regulatory framework for cryptocurrency has been drafted by an interministerial committee headed by Subhash Chandra Garg, Secretary of the Department of Economic Affairs and Finance Secretary. He recently stated that the committee’s report with the recommended crypto regulation is ready to be submitted to the finance minister for approval.
While the content of the report has not been made public, a couple of local news outlets have claimed to have knowledge of a draft cryptocurrency bill called the “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019.” Bloombergquint has made a bold claim that the bill proposes a 10-year jail sentence for a number of crypto activities. News.Bitcoin.com recently provided a preliminary analysis of the leaked information of this bill. Further, four different government bodies have replied to Right to Information (RTI) requests about this bill.
While media reports are not confirmed, Raj said that the news of this bill “has created enough FUD in the Indian crypto trading community to result into a sharp decline in trading volumes” on his exchange.
What do you think of Koinex shutting down due to the banking problem and regulatory clarity? Let us know in the comments section below.
Images courtesy of Shutterstock.
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